135 A.D.3d 671
N.Y. App. Div.2016Background
- Plaintiffs leased residential premises from Guzman for May 21–Sept 5, 2013 for $180,000 plus $18,000 security and $18,000 utility deposits.
- Premises allegedly lacked a valid Southampton rental permit under Town Code § 270-3.
- Plaintiffs informed Guzman the lease was illegal and demanded return of all sums paid; Guzman declined.
- Plaintiffs sued to rescind the lease and recover $216,000; plaintiffs moved for summary judgment; Guzman cross-moved for dismissal.
- Town Code § 270-13 provides that a valid rental permit is a condition precedent to rent collection; enforcement includes penalties.
- Court held Town Code § 270 creates an implied private right of action and that lease was illegal such that recovery of payments is warranted.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Existence of private right of action under Town Code § 270 | Ader argues statute implies private right to recover rent. | Guzman argues no private right unless explicitly stated. | Implied private right: factors satisfied; private action permissible. |
| Lease illegality and enforceability when permit absent | Lease invalid due to lack of permit; illegal to collect rent. | Violation malum prohibitum does not automatically void contract. | Violation renders lease illegal/unenforceable under public policy. |
| Summary judgment proper given record | Evidence supports illegality and entitlement to recovery. | No triable issue on enforceability or damages. | Court properly granted plaintiffs' summary judgment. |
Key Cases Cited
- Benjamin v Koeppel, 85 NY2d 549 (New York 1995) (noncompliance with public-health statutes affects contract legality)
- Lloyd Capital Corp. v Pat Henchar, Inc., 80 NY2d 124 (New York 1992) (forfeitures by operation of law disfavored)
- Simaee v Levi, 22 AD3d 559 (1st Dep't 2005) (private action must be consistent with legislative scheme)
- Village Taxi Corp. v Beltre, 91 AD3d 92 (2d Dept. 2012) (statutory penalties and public policy considerations limiting illegality defense)
- R.A.C. Group, Inc. v Bd. of Educ. of City of New York, 21 AD3d 243 (2d Dept. 2005) (public-policy considerations on illegality)
- Maimonides Med. Ctr. v First United Am. Life Ins. Co., 116 AD3d 207 (1st Dept. 2014) (private right of action within statutory scheme may be implied)
- Cruz v TD Bank, N.A., 22 NY3d 61 (2013) (private rights implied via legislative scheme considerations)
- Uhr v East Greenbush Cent. School Dist., 94 NY2d 32 (1999) (statutory enforcement and private rights considerations)
- Sheehy v Big Flats Community Day, 73 NY2d 629 (1989) (implications for private-right-of-action analysis)
- Brian Hoxie's Painting Co. v Cato-Meridian Cent. School Dist., 76 NY2d 207 (1990) (multifactor test for implied private rights)